Shazam raises $32M to tackle TV ads

Shazam has become famous for providing audio fingerprinting technology that enables users to identify music users hear and want to listen to again later. But the startup wants to go beyond cashing in on app sales and affiliate fees for music: It sees a huge opportunity to be part of the broader TV advertising ecosystem. And it’s raised $32 million in venture capital to seize that opportunity.

The latest funding round is led by Kleiner Perkins Caufield & Byers (KPCB) and Institutional Venture Partners (IVP), with existing investor DN Capital also participating. Shazam has grown pretty dramatically in the 18 months or so since it last announced financing: back then it had about 50 million users, and now has 150 million. And it expects to top 250 million in the next two years, as worldwide smartphone growth leads to further adoption of the audio fingerprinting app.

With such a large footprint, Shazam believes it can provide additional value to advertisers that are looking for ways to interact with a growing number of viewers watching TV with their smartphones in hand. By incorporating its Shazam for TV offering with broadcast TV advertisers, the startup can provide promotional info, coupons and other materials to viewers that are interested in getting exclusive content related to certain shows or products from specific brands.

Early tests of the Shazam for TV product have been positive, with conversion rates well above industry standards. Shazam CEO Andrew Fisher told us in an interview that app users trying to identify music through Shazam typically have about a 10 percent conversion rate for purchases. Those responding to Shazam for TV ads have similar conversion rates when they see Shazam ad prompts on-screen. Furthermore, those that respond to those ads for coupons then see a 27 percent redemption rate. All of which means that Shazam is proving itself to be a pretty effective tool for marketers who want to get people buying their products.

Shazam is interested in both direct sales and in partnering with broadcasters to drive more advertising deals. On the broadcast side, it’s already been used by companies like NBC Universal and MTV to help increase engagement by offering up exclusive content or extras on the second screen. Those content companies can then go to their advertisers to offer up more value for TV ad buys.

To ride that wave, Shazam is taking on new capital as a way to grow its sales and engineering workforce, as well as for possible acquisitions. Fisher said that more than half of Shazam’s workforce has joined the company in the last 12 months, and it will likely double in size again in the next 12 months. That growth will increase its international footprint as it looks beyond its London headquarters to add employees in offices throughout the U.S. Shazam just made its first acquisition of Silicon Valley-based Tunezee last week.

As for other potential acquisition plans, Fisher is holding his cards close to his chest. Without giving away what types of technology Shazam finds interesting for acquisition, he said the company would be looking for teams with good engineering talent that have built apps which, for whatever reason, failed to gain much consumer traction. With hundreds of thousands of mobile apps on the market, that provides a wide range of potential targets.

While audio fingerprinting competitor IntoNow recently launched and almost immediately sold itself to Yahoo, Fisher said Shazam had no immediate plans for a liquidity event, either by being acquired or through an IPO. It’s hoping instead to take a bite out of the broader TV ad market first. At $60 billion for U.S. TV advertising, even with a very small portion of the pie, Fisher thinks Shazam can do extremely well.